The Office of Fair Trading has announced that it will not pursue any further action against the banking industry over the issue of bank charges.

The OFT, which recently lost a case in the Supreme Court into the legality of bank charges for customer who accrue unauthorised debts, claimed that any proposed legal action under Unfair Terms in Consumer Contract Regulations would be unlikely to succeed.

"The OFT has concluded that any investigation it were to continue into the fairness of current unarranged overdraft charging terms under the Unfair Terms in Consumer Contract Regulations (UTCCRs) would have a very limited scope and low prospects of success," the OFT said.

"Given this, it has decided against taking forward such an investigation."

Bank charges, which generate around £2.6bn annually for banks, are an issue that has been subject to a major consumer revolt in recent years. Campaigners argue that the charges are disproportionate and unfairly target some of the most vulnerable sections of society.

A number of legal challenges had originally gone in favour of the OFT but a final appeal, heard at the Supreme Court, ruled that the charges could be considered as a fair service charge.

The OFT argued the charges were "difficult to understand, not transparent, and not subject to effective consumer control" but they did not rule out further action in future, with plans to push for greater transparency and consumer protection on the issue.

"We are committed to securing significant changes to unarranged overdraft charges going forward, whether through voluntary agreement with the banks or by other means," said the OFT's chief executive, John Fingleton.
He threatened to ask the government to change the law if the banks did not co-operate, a stance supported by the Treasury.

"We're working towards a voluntary agreement with the banks, but we don't rule out further action if this doesn't deliver the kind of changes we expect to see," said a Treasury spokesman.

"Through the Financial Services Bill we are legislating to give consumers greater powers and protection for the future, including the ability to take a group action through the courts wherever there is mis-selling or abuse on the parts of banks," he added.